Lockheed Martin 2013 Annual Report Download - page 48

(primarily PTDS as final surveillance system deliveries occurred during the second quarter of 2012); about $195 million for
various integrated warfare systems and sensors programs (primarily Naval systems) due to lower volume; approximately
$65 million for various training and logistics programs due to lower volume; and about $55 million for the Aegis program
due to lower volume. The decreases were partially offset by higher net sales of about $155 million for the LCS program due
to increased volume.
MST’s operating profit for 2013 increased $168 million, or 23%, compared to 2012. The increase was primarily
attributable to higher operating profit of approximately $120 million related to the settlement of contract cost matters on
certain programs (including a portion of the terminated presidential helicopter program); about $55 million for integrated
warfare systems and sensors programs (primarily radar and Halifax class modernization programs) due to increased risk
retirements; and approximately $30 million for undersea systems programs due to increased risk retirements. The increases
were partially offset by lower operating profit of about $55 million for training and logistics programs, primarily due to the
recording of approximately $30 million of charges mostly related to lower-of-cost-or-market considerations; and about
$25 million for ship and aviation systems programs (primarily PTDS) due to lower risk retirements and volume. Operating
profit related to the LCS program was comparable. Adjustments not related to volume, including net profit booking rate
adjustments and other matters, were approximately $170 million higher for 2013 compared to 2012.
2012 compared to 2011
MST’s net sales for 2012 increased $447 million, or 6%, compared to 2011. The increase in net sales for 2012 was
attributable to higher volume and risk retirements of approximately $395 million from ship and aviation system programs
(primarily PTDS; LCS; VLS; and MH-60); about $115 million for training and logistics solutions programs primarily due to
net sales from Sim-Industries, which was acquired in the fourth quarter of 2011; and approximately $30 million as a result of
increased volume on integrated warfare systems and sensors programs (primarily Aegis). Partially offsetting the increases
were lower net sales of approximately $70 million from undersea systems programs due to lower volume on an international
combat system program and towed array systems; and about $25 million due to lower volume on various other programs.
MST’s operating profit for 2012 increased $92 million, or 14%, compared to 2011. The increase was attributable to
higher operating profit of approximately $175 million from ship and aviation system programs, which reflects higher volume
and risk retirements on certain programs (primarily VLS; PTDS; MH-60; and LCS) and reserves of about $55 million for
contract cost matters on ship and aviation system programs recorded in the fourth quarter of 2011 (including the terminated
presidential helicopter program). Partially offsetting the increase was lower operating profit of approximately $40 million
from undersea systems programs due to reduced profit booking rates on certain programs and lower volume on an
international combat system program and towed array systems; and about $40 million due to lower volume on various other
programs. Adjustments not related to volume, including net profit booking rate adjustments and other matters described
above, were approximately $150 million higher for 2012 compared to 2011.
Backlog
Backlog increased slightly in 2013 compared to 2012 mainly due to higher orders and lower sales on integrated warfare
system and sensors programs (primarily Aegis) and lower sales on various service programs, partially offset by lower orders
on ship and aviation systems (primarily MH-60). Backlog increased in 2012 compared to 2011 mainly due to increased
orders on ship and aviation system programs (primarily MH-60 and LCS), partially offset by decreased orders and higher
sales volume on integrated warfare systems and sensors programs (primarily Aegis).
Trends
We expect MST’s net sales to be flat in 2014 compared to 2013. Operating profit is expected to decrease in the low
double digit percentage range from 2013 primarily due to the absence of favorable contractual resolutions that occurred in
2013 as described above and expected charges, net of recoveries, in 2014 for incremental costs related to the November 2013
restructuring plan as described in the “Consolidated Results of Operations” section above, resulting in a decline in operating
margins between the years.
Space Systems
Our Space Systems business segment is engaged in the research and development, design, engineering, and production
of satellites, strategic and defensive missile systems, and space transportation systems. Space Systems is also responsible for
various classified systems and services in support of vital national security systems. Space Systems’ major programs include
the Trident II D5 Fleet Ballistic Missile (FBM), Space Based Infrared System (SBIRS), Advanced Extremely High
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